<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1998.
Registration No. __________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
AMERICAN EDUCATIONAL PRODUCTS, INC.
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(Exact name of Registrant as specified on its Charter)
Colorado 84-1012129
- --------------------------------- -------------------------
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification Number
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
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(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
Clifford C. Thygesen
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
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(Name, address, including zip code, and telephone number
of agent for service of process)
Copies to:
Clifford L. Neuman, Esq.
Nathan L. Stone, Esq.
Neuman, Drennen & Stone, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share (1) Price (1) Fee
- ---------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Common Stock
Purchase
Warrants: 75,757 (2) $ 0.00 $ 0.00 $ 0.00
Common Stock,
$.05
par value: 75,757 (3) $ 10.00 (4) $ 757,570 $ 229.57
TOTAL: $ 757,570 $ 229.57
</TABLE>
- ---------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Reflects 75,757 Common Stock Purchase Warrants that will be issued by us
as a dividend to certain of its Common Stockholders of record on June 5,
1997. The Warrants will be issued immediately after the effective date of
this Registration Statement.
(3) Reflects 75,757 shares of Common Stock issuable upon exercise of the
Warrants.
(4) Based upon the $10.00 per share exercise price of the Warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
Item No. and Heading
In Form S-3
Registration Statement Location in Prospectus
----------------------- ----------------------
1. Forepart of the Registration Forepart of Registration
Statement and outside front Statement and outside front
cover of Prospectus cover page of Prospectus
2. Inside front and back cover Inside front and outside back
pages of Prospectus cover pages of Prospectus
3. Summary Information, Risk Factors Risk Factors
and Ratio of Earnings to Fixed
Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering Price
6. Dilution Dilution
7. Plan of Distribution Plan of Distribution
8. Description of Securities to be Description of Securities
Registered
9. Interest of Named Experts and Legal Matters
Counsel
10. Material Changes Recent Developments
11. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
12. Disclosure of Commission Position Indemnification
on Indemnification for Securities
Act Liabilities
<PAGE>
<PAGE>
PROSPECTUS
AMERICAN EDUCATIONAL PRODUCTS, INC.
-------------------------------------------
75,757
Common Stock Purchase Warrants
75,757 Shares
$.05 par value Common Stock
This Prospectus relates to the offering of securities of American
Educational Products, Inc., a Colorado corporation (the "Company" or "AEP").
On June 2, 1997, our Board of Directors declared a warrant dividend
("Warrant Dividend") payable to our Common Stockholders of record on June 5,
1997 (the "Dividend Record Date"). After declaring the Warrant Dividend, we
filed a Registration Statement on Form S-3, SEC File No. 333-35205 (the
"Dividend Registration") which was declared effective by the Commission on
December 4, 1997. However, when we tried to distribute the Warrant Dividend,
the NASDAQ Stock Market ("NASDAQ") unilaterally declared an Ex-Dividend Date
of December 5, 1997. As a result, the owners of Company Common Stock who sold
their shares of Company Common Stock prior to December 5, 1997 did not receive
the Warrant Dividend they were entitled to receive by virtue of their
ownership of Company Common Stock on June 5, 1997.
We are now registering an additional 75,757 Warrants ("Warrants") that
will be issued by us as a dividend to those Company Common Stockholders of
record on the Dividend Record Date who sold their shares of Company Common
Stock prior to the Ex-Dividend Date of December 5, 1997 (the "Shareholders")
and, as a result, did not receive the Warrant Dividend they were entitled to
receive by virtue of their ownership of Company Common Stock on the Dividend
Record Date. The Warrants will be issued immediately after the effective date
of this Registration Statement. Each Warrant is exercisable for three (3)
years to purchase one (1) share of our Company's Common Stock at an exercise
price of $10.00 per share, subject to adjustment under certain circumstances.
The Warrants are redeemable by us upon thirty (30) days notice at a redemption
price of $.01 per Warrant but only if the last sale price for our Common Stock
exceeds 110% of the then current exercise price for twenty (20) consecutive
trading days.
This Prospectus also covers our offer and sale of 75,757 shares of $.05
par value common stock (the "Common Stock") which are issuable by us pursuant
to the exercise of the Warrants by the Shareholders. See "PLAN OF
DISTRIBUTION."
We will not receive any consideration in connection with the issuance of
the Warrant Dividend. We could receive up to $757,570 in gross proceeds if
all the Warrants are exercised. We will not receive any of the proceeds from
the resale of the Warrants and/or Common Stock by the Shareholders. We have
agreed to pay all of the expenses incurred in connection with the registration
of the Warrants and Common Stock, which are estimated to be $12,000.
Our Common Stock and Warrants are traded on the NASDAQ SmallCap Market
under the symbols AMEP and AMEPW, respectively. On December 4, 1998, the
closing prices were $10-1/16 per share of Common Stock and $1-5/8 per
Warrant, respectively, as reported by NASDAQ. We have no arrangements with
broker-dealers concerning the maintenance of a trading market for the Warrants
and/or Common Stock.
----------------------------------------
SEE "RISK FACTORS" BEGINNING AT PAGE 9 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT YOU SHOULD CONSIDER IN EVALUATING AN INVESTMENT IN THE COMPANY.
----------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
adequacy or accuracy of the Prospectus. Any representation to the contrary is
a criminal offense.
The Date of This Prospectus is December ____, 1998.
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
You may read and copy any document we file at the Commission's Public
Reference Rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Rooms. Our Commission filings are also
available to the public at the SEC's website at http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be part of this Prospectus, and later information
that we file with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934. This Prospectus is part of a
Registration Statement we filed with the Commission.
(a) Registration Statement on Form S-3, SEC File No. 333-43717.
(b) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(c) Proxy Statement for the Annual Meeting of Shareholders held on
June 9, 1998.
(d) Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998.
You may request a copy of these filings at no charge by a written request
to Clifford C. Thygesen, President, American Educational Products, Inc., 6550
Gunpark Drive, Suite 200, Boulder, Colorado 80301 (303) 527-3230. In
addition, you can obtain these filings electronically at the Commission's
worldwide website at http://www.sec.gov/edgarhp/htm.
You should rely only on the information incorporated by reference or
provided in this Prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should
not assume that the information in this Prospectus or any supplement is
accurate as of any date other than the date on the front of those documents.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 that are prospective.
These statements are risks, uncertainties and other factors which could cause
actual results to differ materially from the information contained in the
forward-looking statements. We cannot control many of those risks and
uncertainties which include competitive pressures, changing economic
conditions and other factors.
CAPITAL STOCK INFORMATION
All information with regard to our Common Stock contained in this
Prospectus, including share and per share information, gives effect to a one-
for-five (1-for-5) reverse stock split that occurred on April 22, 1997.
<PAGE>
<PAGE>
THE COMPANY
We manufacture, develop, market and distribute both proprietary and non-
proprietary supplemental educational materials and instructional programs
through its three (3) wholly-owned subsidiaries: Scott Resources, Inc. ("Scott
Resources"); Hubbard Scientific, Inc. ("Hubbard Scientific"); and SL
Distribution, Inc. d/b/a "Summit Learning" ("Summit Learning"). Our executive
offices are located at 6550 Gunpark Drive, Suite 200, Boulder, Colorado
80301. Our telephone number at that address is (303) 527-3230.
Scott Resources manufactures, develops and markets both proprietary and
non-proprietary supplemental educational materials and instructional programs
in the fields of science and mathematics at its principal manufacturing
facility located at 401 Hickory Street, Fort Collins, Colorado 80524. Its
telephone number at that address is (970) 484-7445.
Hubbard Scientific manufactures, develops and markets both proprietary
and non-proprietary supplemental educational and instructional materials in
the field of science. Hubbard Scientific maintains its principal
manufacturing facility at 1120 Halbleib Road, Chippewa Falls, Wisconsin 54729.
Effective April 17, 1998, Hubbard Scientific acquired all of the outstanding
stock of Learning and Leisure, Inc., a New York corporation, and its wholly
owned subsidiary, National Teaching Aids, Inc. ("NTA"). NTA develops,
manufactures, and markets science products for the K-12 market. During April
and May, 1998, the operations of NTA were relocated to Hubbard Scientific's
facility in Chippewa Falls, Wisconsin.
Summit Learning, which we bought in August 1998, distributes supplemental
educational products through the direct mailing of catalogs. Summit
Learning's operations are conducted at its facilities in Fort Collins,
Colorado.
<PAGE>
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS IN ADDITION TO
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS:
LIMITED LIQUIDITY AND CAPITAL RESOURCES. At September 30, 1998, we had
working capital of $2,171,000 based upon current assets of $6,791,000 and
current liabilities of $4,620,000. Of current liabilities, approximately
$1,700,000 was the principal balance due and owing under a revolving line of
credit. Although the line of credit has a scheduled maturity date of April
30, 2000, it also contains a demand provision under which the lender has the
right to demand repayment of the entire balance at any time. Even though we
do not expect to repay the entire debt within the next twelve months, we are
required to classify the entire loan as a current liability. If the lender
did demand repayment in full during the next twelve months, it would have a
significant adverse impact on us. Furthermore, we experienced deficits during
the years ended December 31, 1995 and December 31, 1996, which significantly
decreased our liquidity and capital resources. We took actions during 1997 to
mitigate the impact of the liquidity shortfall which resulted in a reduction
in our accumulated deficit during fiscal 1997 and the first nine months of
fiscal 1998. Nevertheless, there are no guarantees that we can continue to
reduce our accumulated deficit and/or further improve our liquidity.
HISTORICAL LACK OF OPERATING PROFITS. For the year ended December 31,
1996, we reported a net loss of $1,095,000. We also reported net losses for
each of the two preceding years. For the year ended December 31, 1997, we
reported net income of $514,000, and have reported net income for the first
nine months of 1998 of $967,000. We attribute the improved results to an
increased market demand for our products, to a reorganization that
significantly reduced operating costs, and to the sale of an unprofitable
division. Notwithstanding our recent improvements, there can be no assurance
that we can continue our profitable performance.
EXERCISE PRICE OF WARRANTS. We were responsible for setting the exercise
price of the Warrants. The exercise price bears no direct relationship to our
assets, book value, net worth or operations. The $10.00 per share exercise
price of the Warrants is $5.45 per share greater than our $4.55 per share net
tangible book value at September 30, 1998.
NO ASSURANCE OF WARRANT EXERCISE. The Shareholders are under no
obligation to exercise the warrants, and can be expected to do so only if it
is economically reasonable for them to do so. Typically, publicly traded
warrants are not exercised unless exercise is forced, either by us calling
them for redemption, or because they are scheduled to expire; and then they
will be exercised only if the exercise price is less than the market price of
the Common Stock underlying the Warrants. Accordingly, there is no assurance
that the Warrants will be exercised during the Exercise Period.
UNSPECIFIED USE OF PROCEEDS. The monies that we may receive from the
exercise of the Warrants have been allocated generally to provide working
capital for operations. As such, we will use funds as they are received for
such purposes and in such proportions as we deem advisable. While we will
apply the proceeds in a manner consistent with our fiduciary duty and in a
manner consistent with our best interests, we cannot assure you that the
monies received will result in any present or future improvement in our
results of operations.
INTENSE COMPETITION. The industry in which we compete is characterized
by intense competition, and extensive research and development efforts. New
product developments and enhancements of existing products are expected to
continue and we cannot assure you that discoveries by others will not render
our products non-competitive. Sales of technology related products are
growing at a faster rate than sales of manipulatives and videos. We do not
manufacture technology related products and have no such products currently
under development.
There are many companies, both public and private, that develop products
for the same applications as we pursue. The products manufactured by these
competitors range from textbooks to manipulatives and models. Many of these
entities publish catalogs in addition to listing their products in dealer
catalogs. Some of these companies have substantially greater financial,
research and development, manufacturing and marketing experience and resources
than we and represent substantial long-term competition for us. Such companies
may succeed in developing products that are more effective or less costly than
any products that we may currently own or be developing in the future.
Additionally, during the last three years, there has been increasing
competition from foreign manufacturers of educational products. These
products are often priced less than our products. While we can provide our
customers with better delivery schedules and more comprehensive teacher
manuals, foreign competition may still have an adverse effect on us.
INTEGRATION OF RECENTLY ACQUIRED BUSINESSES. We cannot assure you that
the integration of Summit Learning and/or NTA with our operations will be
completed in a manner that is efficient, effective and timely enough to
achieve the anticipated benefits of the acquisitions, or that the acquisitions
will result in additional profits. Integrating the companies will require the
timely, efficient and effective combination of management, sales and marketing
and development and manufacturing teams that prior to the acquisitions
operated in different geographic locations, under varying management
philosophies. Integration of the companies also will require the combination
of differing product lines, product development plans and marketing
approaches. Additionally, the time-consuming task of integrating the
companies may distract our attention from our day-to-day business operations.
MANAGEMENT OF GROWTH; UNSPECIFIED ACQUISITIONS. Our ability to manage
growth, if any, will require us to continue to improve and expand our
management, operational and financial systems and controls. Any measurable
growth in business will result in additional demands on customer support,
sales, marketing, administrative and technical resources and will place
significant strain on our management, administrative, operation, financial and
technical resources and increase demand upon our systems and controls. We
cannot assure you that we will be able to successfully address these
additional demands, that our operating and financial control systems will be
adequate to support our future operations and anticipated growth. Our failure
to manage growth properly could have a material adverse effect upon our
business, financial condition and results of operations. We have sought, and
may continue to seek, potential acquisitions of products, technologies and
businesses that could complement or expand our current product offering and
business. In the event we identify an appropriate acquisition candidate, we
cannot assure you that we would be able to successfully negotiate, finance or
integrate such acquired products, technologies or businesses. Furthermore,
such an acquisition could cause a diversion of our time and resources. We
cannot assure you that a given acquisition, when consummated, would not
materially adversely affect our business and results of operations. See also
"RISK FACTORS -Integration of Recently Acquired Businesses."
DEPENDENCE UPON KEY PERSONNEL. Our future success is dependent on the
continued service of our key technical, marketing, sales, and management
personnel and on our ability to continue to attract, motivate, and retain
highly qualified employees. Except for a one year agreement with our
President, Mr. Thygesen, we currently do not have in place any employment
agreements with our key employees. As a result, our key employees may
voluntarily terminate their employment at any time. Competition for such
employees is intense and the process of locating technical and management
personnel with the combination of skills and attributes required to execute
our strategy is often lengthy. Accordingly, the loss of the services of key
personnel could have a material adverse effect upon our operations and our
development efforts.
PRODUCT PROTECTION. We rely on copyrights and trademarks for protection
of our products. Where registrations of trademarks have not been issued, we
claim common law trademark rights to those names. Notwithstanding the
foregoing, we cannot assure you that we will obtain additional registrations
for any of our trademarks. We may be subject to opposition, cancellation or
infringement proceedings based upon the use of those trademarks. If we lose
the use of any one or more of the trademarks, it could have a material adverse
effect upon our ability to profitably market our products.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. We cannot
assure you that others will not independently develop substantially equivalent
manipulatives and models or otherwise gain access to our trade secrets, that
such trade secrets will not be disclosed or that we can effectively protect
our rights to unpatented trade secrets. Despite our precautions, unauthorized
partes may attempt to design, copy or obtain and use its products and other
information we consider proprietary. We cannot assure you, however, that
these precautions will provide meaningful protection for our or other
proprietary information in the event of unauthorized use or disclosure of such
information
PENDING LITIGATION. In August, 1998, we were named as Defendants in a
civil action brought in the United States District Court for the Central
District of California by Lakeshore Learning Materials (the "Lakeshore
Litigation"). In the Lakeshore Litigation, claims have been asserted against
us based upon alleged copyright and trademark infringement and common law
unfair competition related to certain manipulative kits developed by Hubbard
Scientific. Based upon our preliminary investigation, we believe that the
claims are without merit and have engaged legal counsel to provide a vigorous
defense in the action. Nevertheless, we cannot assure you that we will be
able to successfully defend the infringement claims made by Lakeshore. If
Lakeshore prevails in this litigation, we may be permanently enjoined from
selling the manipulative kits involved and may be obligated to pay significant
damages to the Plaintiff. Even if we are successful in our defense of the
Lakeshore Litigation, the cost of such defense could be substantial and our
management may be required to devote a substantial amount of time to such
defense.
EDUCATIONAL FUNDING. The principal markets for our products are
elementary, middle and secondary school systems. Most, if not all, of these
potential customers rely upon federal and state funding in order to support
their activities. The ability of these institutions to purchase our products
is dependent upon continued support and funding for public education. A
reduction or withdrawal of such support could result in a diminished demand
for our products, which, in turn, would adversely effect our operations and
profitability.
MANAGEMENT'S LACK OF VOTING INFLUENCE. All of our officers and directors
as a group own only 50,551 shares of Common Stock, and vested options
exercisable to acquire an additional 128,400 shares of Common Stock. Even
giving effect to the exercise of their outstanding and vested options, as a
group they would exercise voting control over only 15.8% of our outstanding
shares of Common Stock following completion of this offering. As a result of
this lack of voting influence as stockholders, we cannot assure you that our
officers and directors will be able to implement our business plans and
strategies. Further, it is possible that stockholders with greater voting
influence could initiate actions which could be adverse to those plans or
hostile to current management.
LIMITED LIQUIDITY IN TRADING MARKET OF SHARES AND/OR WARRANTS. Prior to
the Offering, our Common Stock and Warrants have been thinly traded on the
NASDAQ SmallCap Market under the symbols AMEP and AMEPW. While there
currently exists a limited and sporadic public trading market for our
securities, the prices are subject to high degrees of volatility and we cannot
assure you that the market will improve in the future. Factors discussed
herein may have a significant impact on the market prices of our Common Stock
and Warrants. See "DESCRIPTION OF SECURITIES."
NASDAQ SYSTEM MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES
FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS. The Securities and Exchange
Commission (the "Commission") has approved rules imposing more stringent
criteria for the listing of securities on NASDAQ, including standards for
maintenance of such listing. If we are unable to satisfy NASDAQ's maintenance
criteria in the future, our securities could be de-listed, and trading, if
any, would thereafter be conducted in the over-the-counter market in the so-
called "pink sheets" or the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. ("NASD"). As a consequence of such
de-listing, an investor could find it more difficult to find relevant and
timely information about us and to sell, or to get accurate quotations of, our
securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than Five Dollars ($5.00) per share, subject to
certain exceptions. Such exceptions include any equity security listed on
NASDAQ and any equity security issued by an issuer that has (i) net tangible
assets of at least Two Million Dollars ($2,000,000), if such issuer has been
in continuous operation for three (3) years, (ii) net tangible assets of at
least Five Million Dollars ($5,000,000), if such issuer has been in continuous
operation for less than three (3) years, or (iii) an average annual revenue of
at least Six Million Dollars ($6,000,000), if such issuer has been in
continuous operation for less than three (3) years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
If our securities are not quoted on NASDAQ, or we do not have Two Million
Dollars ($2,000,000) in net tangible assets, trading in our securities would
be covered by Rules 15g-1 through 15g-6 promulgated under the Exchange Act for
non-NASDAQ and non-exchange listed securities. Under such rules, broker-
dealers who recommend such securities to persons other than established
customers and accredited investors must make a special written suitability
determination that the penny stock is a suitable investment for the purchaser
and receive a purchaser's written agreement to the transaction. Securities are
exempt from these rules if the market price of the Common Stock is at least
Five Dollars ($5.00) per share.
Although our Common Stock and Warrants will, as of the date of this
Prospectus, be outside the definitional scope of a penny stock, as the market
price of the Common Stock is in excess of Five Dollars ($5.00) per share, and
our Common Stock and Warrants are listed on NASDAQ, in the event the Common
Stock and/or Warrants were subsequently to become characterized as penny
stocks, the market liquidity for our securities could be severely affected. In
such an event, the regulations on penny stocks could limit the ability of
broker-dealers to sell our securities and adversely affect the ability of
purchasers of our securities to sell our securities in the secondary market.
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE. As of
September 30, 1998, 1,034,323 shares of our Common Stock were issued and
outstanding, 330,391 of which are "restricted securities" and under certain
circumstances may, in the future, be sold pursuant to a registration under the
Securities Act or in compliance with Rule 144 adopted under the Securities
Act. In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person who has beneficially owned restrictive shares of Common
Stock for at least one (1) year is entitled to sell, within any three-month
(3-month) period, a number of shares that does not exceed the greater of one
percent (1%) of the total number of outstanding shares of the same class, or
if the Common Stock is quoted on NASDAQ or a stock exchange, the average
weekly trading volume during the four (4) calendar weeks immediately preceding
the sale. A person who presently is not and who has not been one of our
affiliates for at least three (3) months immediately preceding a sale and who
has beneficially owned the shares of Common Stock for at least one (1) year is
entitled to sell such shares under Rule 144 without regard to any of the
volume limitations described above. We may grant options to purchase an
additional 9,600 shares of Common Stock pursuant to the Incentive Stock Option
Plan (the "Plan"). We have registered for sale all shares issuable upon
exercise of the options granted pursuant to the Plan. As a result, when the
options are exercised, the shares issued and will be free-trading, except for
certain limitations imposed upon directors, officers and affiliates who
exercise options granted under the Plan. We cannot predict what effect, if
any, that sales of shares of Common Stock or the availability of such shares
for sale will have on the market prices prevailing from time-to-time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely effect prevailing prices for the
Common Stock and could impair our ability to raise capital in the future
through the sale of equity securities. Actual sales or the prospect of future
sales of shares of Common Stock under Rule 144 may have a depressive effect
upon the price of the Common Stock and the market therefor.
POTENTIAL ADVERSE EFFECTS OF FUTURE SALES OF PREFERRED STOCK. Our
Articles of Incorporation, as amended, authorize the issuance of up to
50,000,000 shares of preferred stock. The Board of Directors may fix and
determine the relative rights and preferences of preferred shares and may
issue such shares, without further stockholder approval. As a result, the
Board of Directors could authorize the issuance of a series of preferred stock
which would grant to holders preferred rights to our assets upon liquidation,
the right to receive dividend coupons before dividends would be declared to
common stockholders, and the right to the redemption of those shares, together
with a premium, prior to the redemption of Common Stock. Common stockholders
have no redemption rights. In addition, the Board could issue large blocks of
voting stocks to fend against unwanted tender offers or hostile takeovers
without further shareholder approval. (See "DESCRIPTION OF SECURITIES.")
POSSIBLE DILUTION FROM FUTURE SALES OF ADDITIONAL SHARES. Our Board of
Directors has the authority to issue additional shares of Common Stock and to
issue options and warrants to purchase shares of our Common Stock without
shareholder approval. Future issuance of Common Stock could be at values
substantially below the exercise price of the Warrants, and therefore could
represent further substantial dilution to investors in this Offering. In
addition, the Board could issue large blocks of voting stock to fend off
unwanted tender offers or hostile takeovers without further shareholder
approval. We have outstanding options exercisable to purchase up to 171,250
shares of Common Stock at a weighted average exercise price of $5.57 per
share; warrants exercisable to purchase up to 926,765 shares of Common Stock
at weighted average exercise price of $9.94 per share. Exercise of the
warrants and options could have a further dilutive effect on existing
stockholders and investors in this Offering. (See "DESCRIPTION OF
SECURITIES.")
SUBSTANTIAL DILUTION. As of September 30, 1998, we had sold or issued
the outstanding 1,034,323 shares of Common Stock at an average cost per share
of approximately $6.79, which is $3.21 per share less than the Warrant
exercise price. At September 30, 1998, we had a net tangible book value of
$4,710,000 or $4.55 per share of Common Stock outstanding, based on 1,034,323
shares issued and outstanding. In exercising Warrants, you may sustain an
immediate substantial dilution of your exercise price per share of $10.00.
NEED FOR CURRENT PROSPECTUS. You may not exercise the Warrants unless we
maintain with the Commission a current and effective Registration Statement
and Prospectus covering the shares of Common Stock issuable upon their
exercise. While we have undertaken to do so and plan to do so, we cannot
assure you that a current Registration Statement and Prospectus will be in
effect when you attempt to exercise them.
MARKET OVERHANG FROM WARRANTS AND OPTIONS. Immediately prior to the
Offering, we had outstanding 1,098,015 warrants and options. To the extent
that such stock options or warrants are exercised, dilution to stockholders
may occur. Exercise of these options or warrants, or even the potential of
their exercise or conversion, may have an adverse effect on the trading price
and market for our Common Stock. The holders of the options or warrants are
likely to exercise at times when the market price for the shares of Common
Stock exceeds the exercise price of the options or warrants. Accordingly, the
issuance of shares of Common Stock upon exercise of the options or warrants
may result in dilution of the equity represented by the then outstanding
shares of Common Stock held by other shareholders. Holders of the options or
warrants can be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital on terms which are more
favorable to us than the exercise terms provided by such options or warrants.
(See "DESCRIPTION OF SECURITIES.")
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION. We have the right to
redeem the Warrants at a price of $0.01 per Warrant upon 30 days' notice,
mailed after the closing bid price of the Common Stock has equaled or exceeded
$11.00 for a period of twenty (20) consecutive trading days. You may exercise
the Warrants until the close of the business day preceding the date fixed for
redemption. Redemption of the Warrants could force you to exercise the
Warrants and pay the Exercise Price at a time when it may be disadvantageous
for you to do so, to sell the Warrants at the then current market price when
you might otherwise wish to hold the Warrants, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption. See "DESCRIPTION OF SECURITIES."
<PAGE>
<PAGE>
DILUTION
Our net tangible book value at September 30, 1998 was $4,710,000, or
$4.55 per share, based upon 1,034,323 shares outstanding. Net tangible book
value per share is determined by dividing the number of outstanding shares of
Common Stock into the net tangible book value of the Company (total assets
less total liabilities and intangible assets).
If any outstanding Warrants are exercised, the number of Common Shares
outstanding will increase and our net tangible book value will increase. The
exercise of any Warrants at a time when the exercise price is greater than our
net tangible book value per share will increase the net tangible book value
per share of shares held by the then current shareholders and decrease the net
tangible book value per share of the shares purchased pursuant to the Warrant
exercise. Dilution is the reduction of value of the purchaser's investment
measured by the difference between the Warrant exercise price and the net
tangible book value per share after the Offering. The dilution per share will
decrease with the exercise of each additional Warrant because the proceeds
from each such exercise will increase our net tangible book value.
<PAGE>
<PAGE>
USE OF PROCEEDS
If all of the 75,757 shares offered hereby are purchased upon exercise of
the Warrants, then we will receive gross proceeds of up to $757,570, from
which we will pay the expenses which will be incurred in connection with the
registration of the shares, which are estimated to be $12,000. You will not
pay any of the expenses which are expected to be incurred in connection with
the registration of the shares, but will pay all commissions, discounts and
other compensation to any securities broker-dealers through whom you sell any
of the shares.
We will utilize the net proceeds, if any, realized from the exercise of
the Warrants for working capital and for general corporate purposes, at our
discretion. Actual expenditures, however, may vary substantially depending
upon economic conditions and opportunities we are able to identify. Due to an
inability to precisely forecast events, we are unable to predict the precise
period for which this Offering will provide financing.
DETERMINATION OF OFFERING PRICE
The Offering Price of the 75,757 shares offered pursuant to the exercise
of the Warrants is $10.00 per share. The exercise price per share was
determined by us and bears no relationship to the market price of our Common
Stock, the prevailing market conditions, our operating results in recent
periods, our book value or other recognized criteria of value.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
On June 2, 1997, in response to a public investor accumulating
approximately 30% of the Company's total issued and outstanding shares, we
declared a Warrant Dividend payable to our Common Stockholders of record on
June 5, 1997 (the "Dividend Record Date"). After we declared the Warrant
Dividend, NASDAQ unilaterally declared the Ex-Dividend Date to be December 5,
1997. As a result, persons who owned our Common Stock on June 5, 1997, the
Dividend Record Date, who sold their shares before December 5, 1997, did not
receive the Warrant Dividend as we had intended.
We have agreed to issue additional Warrants as a dividend to those
shareholders of record on June 5, 1997 who sold their shares of Company Common
Stock before December 5, 1997. The Warrants will be issued immediately after
the effective date of this Registration Statement. The Warrants entitle the
holders to purchase up to 75,757 shares of Common Stock at an exercise price
of $10.00 per share.
The shares of Common Stock to be issued upon exercise of the Warrants are
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
We are offering the Warrants and the shares of Common Stock underlying
the Warrants. No underwriter or placement agent will be involved and no
commissions or similar compensation will be paid to any person. You may
resell the Warrants and/or shares of Common Stock from time to time in
transactions (which may include block transactions)on the NASDAQ SmallCap
Market, in negotiated transactions, or through methods of sale, at market
prices prevailing at the time of sale, or at negotiated prices. You may sell
the Warrants and/or Common Stock directly to purchasers or through broker-
dealers that may act as agents or principals. Such broker-dealers may receive
compensation in the form of discount, concessions or commissions from you
and/or the purchasers of the Warrants and/or shares of Common Stock.
You and any broker-dealers that act in connection with the sale of the
Warrants and/or shares of Common Stock as principals may be deemed to be
"Underwriters" within the meaning of Section 2(11) of the Securities Act and
any commissions received by them and any profit on the resale of the Warrants
and/or shares of Common Stock might be deemed to be underwriting discounts and
commissions under the Securities Act. You may agree to indemnify any agent,
dealer, or broker-dealer that participates in transactions involving sales of
the Warrants and/or shares of Common Stock against certain liabilities,
including liabilities arising under the Securities Act. We will not receive
any proceeds from the issuance of the Warrant Dividend or from the sales of
shares of Common Stock by you. Transactions involving the Warrants and/or
shares of Common Stock or even the potential of such sales, may have an
adverse effect on the market price of the Warrants and/or our Common Stock.
We have agreed to pay all expenses incurred in connection with the
registration of the securities offered hereby. You will be responsible to pay
any and all commissions, discounts and other payments to broker-dealers
incurred in connection with your sale of the Warrants and/or Common Stock.
<PAGE>
<PAGE>
INDEMNIFICATION
Our By-Laws of the Company provide for the indemnification of Officers
and Directors to the maximum extent allowable under Colorado law. Insofar as
the indemnification for liabilities arising under the Securities Act of 1933,
as amended, may be permitted to Directors, Officers or persons controlling us
pursuant to such provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
We are authorized to issue up to 100,000,000 shares of Common Stock, $.05
par value per share, and 50,000,000 shares of preferred stock,$.01 par value
per share.
The Warrants and shares of Common Stock covered by this Prospectus will
be fully paid and nonassessable.
Common Stock
- ------------
Each holder of our Common Stock is entitled to one vote for each share
held of record. Voting rights in the election of directors are not cumulative,
and, therefore, the holders of more than 50% of our Common Stock could, if
they chose to do so, elect all of the directors.
The shares of Common Stock are not entitled to preemptive rights and are
not subject to redemption or assessment. Subject to the preferences which may
be granted to holders of preferred stock, each share of Common Stock is
entitled to share ratably in distributions to shareholders and to receive
ratably such dividends as may be declared by the Board of Directors. Upon our
liquidation, dissolution or winding up, subject to prior liquidation or other
preference rights of holders of preferred stock, if any, the holders of Common
Stock are entitled to receive pro rata those assets which are legally
available for distribution to shareholders. The issued and outstanding shares
of Common Stock are validly issued, fully paid and nonassessable.
Preferred Shares
- ----------------
Our Articles of Incorporation authorize issuance of a maximum of
50,000,000 Preferred Shares. The Articles of Incorporation vest the Board of
Directors with authority to divide the class of Preferred Shares into series
and to fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by the laws of the
State of Colorado and the Articles of Incorporation in respect of, among other
things, (1) the number of Preferred Shares to constitute such series, and the
distinctive designations thereof; (b) the rate and preference of dividends, if
any, the time of payment of dividends, whether dividends are cumulative and
the date from which any dividend shall accrue; (c) whether Preferred Shares
may be redeemed and, if so, the redemption price and the terms and conditions
of redemption; (d) the liquidation preferences payable on Preferred Shares in
the event of involuntary or voluntary liquidation; (e) sinking fund or other
provisions, if any, for redemption or purchase of Preferred Shares; (f) the
terms and conditions by which Preferred Shares may be converted, if the
Preferred Shares of any series are issued with the privilege of conversion;
and (g) voting rights, if any.
In the event of a proposed merger, tender offer, proxy contest or other
attempt to gain control of the Company not approved by the Board of Directors,
it would be possible for the Board of Directors, subject to any limitations
imposed by applicable law, the Company's Articles of Incorporation, the terms
and conditions of any outstanding class or series of preferred shares and the
applicable rules of any securities exchanges upon which our securities are at
any time listed or of other markets in which our securities are at any time
listed, to authorize the issuance of one or more series of Preferred Stock
with voting rights or other rights and preferences which would impede the
success of the proposed merger, tender offer, proxy contest or other attempt
to gain control of us. The issuance of Preferred Stock may have an adverse
effect on the rights (including voting rights) of holders of Common Stock.
Warrants
- --------
We are authorized to issue up to 992,055 warrants, including the issuance
of the Warrants that will be issued to you after the effectiveness of the
Registration Statement. The Warrants covered by this Prospectus entitle the
holders thereof to purchase 75,757 shares of Common Stock at an exercise price
of $10.00 per share. The Warrants are exercisable for a period beginning the
effective date of the Registration Statement and ending three (3) years from
the date of such effectiveness. In the event the Warrants are not exercised
within such three-year period, all unexercised Warrants will expire and be
void and of no further force or effect. The Warrant exercise period may be
extended by us upon thirty (30) days' notice to the Shareholders. The Warrants
will expire, become void and be of no further force or effect upon conclusion
of the applicable exercise period, or any extension thereof.
The Warrants will be governed by the terms of a Warrant Agreement between
us and Corporate Stock Transfer, Inc., as Warrant Agent. The Warrants are
redeemable upon 30 days notice, at our option, at a redemption price of $.01
per Warrant, if the last sale price for our Common Stock exceeds 110% of the
then current warrant exercise price for 20 consecutive trading days. The
exercise price, number and kind of common shares to be received upon exercise
of the Warrants are subject to adjustment on the occurrence of certain events,
such as stock splits, stock dividends or recapitalization. In the event of
our liquidation, dissolution or winding up, the holders of the Warrants will
not be entitled to participate in the distribution of our assets.
Additionally, holders of the Warrants have no voting, pre-emptive, liquidation
or other rights of shareholders, and no dividends will be declared on the
Warrants or the shares underlying the Warrants.
The Warrants will be issued to you as part of a dividend to our Common
Shareholders, and upon issuance will be freely tradeable. Prior to this
Offering, our Warrants have been thinly traded on the NASDAQ SmallCap Market.
Continuation of low volume trading may adversely affect the liquidity of large
holdings and may contribute to high volatility of the price of our Warrants.
Additionally, we cannot assure you that a public trading market for the
Warrants will continue.
<PAGE>
<PAGE>
LEGAL MATTERS
The law firm of Neuman, Drennen & Stone, LLC, Temple-Bowron House,
Boulder, Colorado will issue an opinion regarding the legality of the
Warrants. We will pay the firm of Neuman, Drennen & Stone, LLC a fee,
estimated to be $6,000. Clifford L. Neuman, a member of the firm, has been a
member of our Board of Directors since November 1990, and its Audit Committee
since April, 1991, and also owns 13,800 shares of our Common Stock, warrants
to purchase an additional 13,000 shares of Common Stock and options
exercisable to purchase an additional 16,200 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997, 1996 and 1995 and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference herein and in the
Registration Statement and Prospectus in reliance upon the report of HEIN +
ASSOCIATES LLP, Independent Certified Public Accountants, incorporated by
reference and upon the authority of said firm as experts in accounting and
auditing.
<PAGE>
<PAGE>
- ----------------------------------- -----------------------------------
You should rely only on the
information incorporated by AMERICAN EDUCATIONAL
reference or provided in this PRODUCTS, INC.
Prospectus. We have not
authorized anyone to provide you
with different information. We
are not making an offer of these 75,757
securities in any state where Common Stock Purchase
the offer would not be permitted. Warrants
You should not assume that the
information contained in this 75,757 Shares
Prospectus is accurate as of any
date other than the date on the
front of this document or the
date of documents incorporated
by reference.
TABLE OF CONTENTS
Page
----
Available Information. . . . 5
Incorporation by Reference . 6
The Company. . . . . . . . . 8
Risk Factors . . . . . . . . 9 ------------------------------
Dilution . . . . . . . . . .16 PROSPECTUS
Use of Proceeds. . . . . . .17 ------------------------------
Determination of Offering
Price. . . . . . . . . . . .17
Plan of Distribution . . . .18
Indemnification. . . . . . .19
Description of Securities. .20
Legal Matters. . . . . . . .22
Experts. . . . . . . . . . .22 _______________, 1998
- ---------------------------------------------------------------------------
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
The estimated expenses of the offering, all of which are to be borne
by us, are as follows:
SEC Filing Fee $ 229.57
Printing Expenses* 600.00
Accounting Fees and Expenses* 2,000.00
Legal Fees and Expenses* 6,000.00
Blue Sky Fees and Expenses* 1,000.00
Registrar and Transfer Agent Fee* 1,000.00
Miscellaneous* 1,170.43
----------
Total* $12,000.00
- --------------------------
* Estimated
Item 15. Indemnification of Directors and Officers.
-----------------------------------------
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
a. Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide for the indemnification of a corporation's officers and directors
under certain circumstances.
* * *
b. Article XII of Registrant's Articles of Incorporation provide that
the corporation may indemnify each director, officer, and any employee or
agent of the corporation, his heirs, executors and administrators, against
expenses reasonably incurred or any amounts paid by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being or having been a director, officer, employee or agent of the corporation
to the extent permitted by the law as recited above in subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation provides, in
part:
"e. To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability for
monetary damages for breach of fiduciary duty as a director."
d. We currently pay for and maintain an insurance policy in the amount
of $1,000,000 that covers directors' and officers' liability.
Item 16. Exhibits.
--------
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation SB:
Exhibit No. Title
- ----------- -----
4.1 Form of Warrant Agreement (including form of warrant
certificate)
5.1 Opinion of Neuman, Drennen & Stone, LLC
24.1 Consent of Hein + Associates, LLP
24.2 Consent of Neuman, Drennen & Stone, LLC
- --------------------------------
Item 17. Undertakings.
------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
4. To provide, upon effectiveness, certificates in such
denominations and registered in such names as are required to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes to deliver or to cause
to be delivered with the Prospectus to each person to whom the prospectus is
sent or given the latest annual report to securityholders that is incorporated
by reference in the Prospectus and furnish pursuant to and meeting the
requirements of Rule 14a-3 or 14c-3 under the Securities Exchange Act of 1934;
and where interim financial information required to be presented by Article 3
of Regulation S-X are not set forth in the Prospectus, to deliver or cause to
be delivered to each person to whom the Prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized. In the
City of Boulder, State of Colorado on the 10th of December, 1998.
AMERICAN EDUCATIONAL PRODUCTS, INC.,
a Colorado corporation
By: /s/ Clifford C. Thygesen
-------------------------------------
Clifford C. Thygesen, President
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement of Form S-3 has been signed by the following persons in
the capacities with American Educational Products, Inc. and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert A. Scott Chairman of the Board, 12/10/98
- ---------------------------- Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, CEO, Director 12/10/98
- ----------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Chief Financial Officer, 12/10/98
- ---------------------------- Assistant Secretary
Frank L. Jennings
/s/ Steven B. Lapin Director 12/10/98
- ----------------------------
Steven B. Lapin
/s/ Stephen G. Calandrella Director 12/10/98
- ----------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 12/10/98
- ----------------------------
Wayne R. Kirschling
/s/ Richard J. Ciurczak Director 12/10/98
- ----------------------------
Richard J. Ciurczak
/s/ Clifford L. Neuman Director 12/10/98
- ----------------------------
Clifford L. Neuman
